The Heated Battle Over Fisker‘s Assets in Chapter 11
Table of Contents
- The Heated Battle Over Fisker’s Assets in Chapter 11
- A Troubled Past and a Predominant Lender
- A Controversial Deal and Allegations of Suspect Activity
- Competing Narratives and Uncertain Future
- The Turbulent Road Ahead for Fisker: A Chapter 11 Hearing Recap
- A Complex Case Unfolds
- Concerns Raised by Legal Experts
- A Race Against Time
Fisker, the electric vehicle (EV) startup, is just days into its Chapter 11 bankruptcy proceedings, and already, a fierce battle is brewing over its assets. One lawyer has even accused the company of liquidating property “outside the court’s supervision,” raising serious concerns about transparency and fairness in the process.
A Troubled Past and a Predominant Lender
At the heart of this dispute lies Fisker’s relationship with its largest secured lender, Heights Capital Administration, an affiliate of financial services giant Susquehanna Worldwide Group. Heights extended over $500 million to Fisker in 2023 (with the option to convert that debt into equity), a move made at a time when Fisker’s financial distress was becoming increasingly apparent.
Initially, this funding wasn’t secured by any assets. However, when Fisker breached a covenant by failing to file its third-quarter financial statements on time in late 2023, the situation changed dramatically. To waive this breach, Fisker agreed to grant Heights first priority on all of its existing and future assets, giving them significant leverage over the company’s fate.
A Controversial Deal and Allegations of Suspect Activity
Alex Lees, a lawyer representing a group of unsecured creditors owed over $600 million, expressed his concerns during the first hearing on Friday. He argued that Fisker’s tardy regulatory filing was a “minor technical default” that inexplicably led to the startup essentially handing over control of its entire business to Heights. Lees believes this deal was detrimental to both Fisker and its creditors, stating, “The best thing to do would have been to file for chapter months in the past.”
He further alleged that Fisker has been “liquidating outdoors the court’s supervision” for the benefit of Heights, characterizing it as “suspect activity.” Fisker has indeed been engaged in cost-cutting measures and selling off vehicles in the lead-up to its bankruptcy filing. Reports indicate that Fisker has been slashing prices and selling off its Ocean SUVs to stay afloat.
Competing Narratives and Uncertain Future
Scott Greissman, representing Heights’ investment arm, vehemently refuted Lees’ claims, calling them “utterly inappropriate, utterly unsupported,” and dismissing them as mere sound bites designed for media attention. He emphasized that Heights extended a substantial amount of credit to Fisker and pointed out that even if Fisker manages to sell its entire remaining stock of around 4,300 Ocean SUVs, it would likely only cover a fraction of Heights’ secured debt, which currently exceeds $180 million.
Attorneys revealed in court on Friday that they have reached a preliminary agreement to sell these Ocean SUVs to an unnamed car leasing firm. However, the future remains uncertain for Fisker and its other assets. The company claims to have between $…
The Turbulent Road Ahead for Fisker: A Chapter 11 Hearing Recap
A Complex Case Unfolds
Fisker’s recent journey through bankruptcy court has been anything but smooth. The electric vehicle manufacturer, aiming to make a comeback with its Ocean model, found itself entangled in a complex legal battle during a Chapter 11 hearing this week. While Fisker initially sought protection under Chapter 11 to restructure its finances and continue operations, concerns arose regarding the company’s ability to navigate this path successfully.
The court proceedings revealed a tangled web of financial complexities. While Fisker boasts assets valued at over $500 million, including manufacturing equipment like 180 assembly robots and a state-of-the-art paint shop, the company’s liabilities cast a long shadow. The sale of its Ocean stock to a new investor has raised questions about whether Chapter 11 is even viable in this scenario.
Concerns Raised by Legal Experts
Linda Richenderfer, a lawyer representing the US Trustee’s Office, expressed her “great concern” that Fisker’s case might ultimately convert into a straight Chapter 7 liquidation. This outcome would leave creditors scrambling for whatever assets remain after the sale of the Ocean stock, potentially leaving many with minimal returns.
Even Judge Thomas Horan, presiding over the hearing, acknowledged the gravity of the situation. He commended the US Trustee’s Office for diligently working through a “really difficult” case, but his tone hinted at the challenges ahead.
A Race Against Time
The next hearing is scheduled for June 27th, leaving Fisker with a limited window to address these concerns and present a viable plan for restructuring its finances. The company’s future hinges on its ability to convince the court that Chapter 11 offers a realistic path to recovery, rather than succumbing to the pressures of liquidation.
For those interested in learning more about the intricacies of bankruptcy proceedings, our comprehensive guide to bankruptcy law provides valuable insights into this complex legal landscape.
